Author: The Founder

Today I spent my lunchtime at one branch of the largest asset management companies in Africa. They were my stockbrokers in my teens and you could say they still are my stockbrokers because I don’t buy shares for speculative purposes.

Today my visit was different. I wasn’t buying or selling shares. I had gone there to discuss funding, specifically a private placement for Prosper on Farms. A private placement involves raising capital from private investors privately. I know the firm can do it because they were involved in the listing of a number of companies on the stock exchange. They also have offices in South Africa, Zimbabwe, and well, London, we don’t call it the UK. LOL

Anyway, they told me that they only focus on deals worth US$5 million and above. Good for Prosper on Farms’ farmers right? LOL

For global readers of this post, the firm I am talking about is more of a Morgan Stanley or a Goldman Sachs than a venture capital firm, except that it is in Africa.

By the time I left I was of the opinion that Prosper on Farms will have to raise funds from the London Stock Exchange (AIM). It was actually my idea and it comes from years of reading and actually investing on the stock market.

But what I will tell you right now is that as great a company the stockbroking firm or asset management company is (they do all sorts of financial things)… the company is just a copy-and-paste of the UK way of doing things. If you ever read the US venture capitalist Bill Draper’s book on venture capital (The Startup Game: Inside The Partnership Between Venture Capitalists and Entrepreneurs) and how he funded companies in the US… that is not how this company does it.

The investment company I visited wants your startup to be worth US$200 million when you come to them for US$5 million.

The US$200 million is my idea but you get the point. The only money for startups in Africa is for fintech (financial technology) not irrigation.

Oh yes, we did even talk about the funding of Facebook and others. It wasn’t me who started on that road.

Let me save you your time. The truth is, given the chance to go back in time, the investment company would not invest in dorm-room Facebook. Their way of doing things and style is Orthodox Oxford, Cambridge would be a lot better. Oxford! It is not American or Silicon Valley-style. If Mark Zuckerberg went to them, with dorm-room Facebook, they would only want to invest valuing the company on assets, computers, yet Facebook was on paid hosting and Mark Zuckerberg only had a laptop. They would not invest in Facebook’s growth potential.

Oh yeah, one of the things they said was they would want to look at the team to see if the team is capable of using the money in a way that investors will not lose their money. LOL. I mean, come on! I have a great and capable team, but think about this for a minute. Facebook had university students as the founders, that is all there was when they started and it was up and running at Harvard.

I told you these guys are Orthodox Oxford.

No offence but, name one world-changing startup from Oxford? Just one, that you use every day or whose products you use every day. Just one, not two. One. Excluding books that most investment managers in the English-speaking world, especially former colonies, will read and be influenced by to be afraid to take risks. I don’t know any. Maybe it is because I didn’t go to Oxford.

Cambridge at least has ARM (mobile phone chips) and others. The investment firm would never have been an early investor in Facebook. To invest in Facebook when it was still operating out of a dorm room, they would have wanted the team to be maybe full of managers from Intel and Procter and Gamble, – or even better, be former Friendster or MySpace employees who have social network industry experience – before they could be convinced to invest US$5 million.

Like I told you, they are my stockbrokers. I know the companies they floated or listed on the stock exchange. Banks, and companies that sell things, old companies, not startups, and when they were doing that they were sponsors and underwriters (financiers). If you look at the Zimbabwe Stock Exchange, there is probably just one tech company there. The rest of the companies are service and manufacturing companies.

In that meeting I was even told that, oh, actually, it was put to me like this – name one US startup that is profitable? Then I was told that Tesla is not profitable, and Uber too. So, you can see what I was dealing with. Maybe all those people putting money in Uber and Tesla are not very clever hey. LOL

I mean, there was a time when Amazon was making losses, for years, and then it started to make profits. Uber recently made a profit. I admit I don’t follow news about Tesla much.

The mindset of most investment companies in Africa is really orthodox, like Oxford Orthodox, and it follows the Oxford tradition.

What a lot of investment managers educated in former UK colonies will tell you is exactly how investment managers in the UK are trained to invest, Oxford-style, and that is the reason why you find UK startups complaining that UK startups are not even supported by UK venture capital companies that they say are very risk averse compared to US venture capital companies. It is also the same reason why an investment manager trained in a former British colony will fit in right at home in the UK. They will all speak the same investment language in the office.

When I got home, and I was reflecting on that meeting, and how Mark Zuckerberg raised funding for Facebook, I just said to myself every entrepreneur needs a Sean Parker. Yes, I know Eduardo Saverin invested his money in Facebook before Sean Parker, but it was Sean Parker who really drove the fundraising for Facebook.

The guy who funded Apple, the very first investor, was funding 20-somethings.

I get it, sometimes job security concerns can make you not take that risk with investor’ money.

A fun story I will tell you right now is something that Strive Masiyiwa once said. At least, starting from Zimbabwe, his company invested over US$1 billion into Zimbabwe over 10 years.

Masiyiwa, who is now a billionaire, said when he was starting Econet, and he was looking for capital, he went to the bankers and he said he needs like US$10 million. The bankers then said why don’t you start small, maybe with one base station. LOL

(That is also what the investment company said to me. I wanted to tell them about Masiyiwa’s experience then I decided not to because it would then take me a lot of time trying to make the investment company understand that one base station does not a mobile network make.)

Masiyiwa said the banks did not even understand how a mobile network works. LOL. Maybe the bankers expected one transmitter to cover 1000km.

You can literally see the difference from US venture capital or Silicon Valley investors. When US venture capital invests in Uber or AirBnB when they are just pitchdecks, the founders and investors are literally bent on building a massive institution from day one and within the shortest time possible.

The bankers and investors of the Oxford tradition, – the Oxford tradition which is now the DNA of the investment tradition of former British colonies in Africa -, on the other hand, want you to start with one base station or one borehole or one farm, and then gradually and painstakingly slowly give you loans or funds to also grow slowly and maybe – but surely.

I will call it the Oxford method.

If you are intent on increasing irrigation penetration in Africa from 6% to 50% of the cultivated irrigable land, you will take 473 years to achieve that goal using the Oxford method.

Using the US venture capital method, you could achieve that goal in less than 10 years, in your lifetime, at the very least.

LOL. Whether we prosper or we fail, I am going to have lots of stories to tell.

May you prosper.

While raising funds to put farms in Zimbabwe and the rest of Africa under irrigation, Prosper on Farms has had to tell some investors that it wants to try and test a number of different business models. In the end, every investor wants to invest in a business that has a tried and tested business model. However, before we get there, it seems some investors expect that a startup must have settled on one particular business model. I think that investment approach is dangerous sometimes, especially for novel and underserved markets whose market characteristics are mixed. Prosper on Farms is very ready, willing, and driven to adapt to the environment and to change things given the circumstances.

Here is one interesting example. It used to be the revealed wisdom that for ecommerce to work in Africa, a high payment card penetration was a prerequisite, because that is what drove payments in the US, the dominant ecommerce market. Yet we see in Europe that Zalando succeeded by adapting its payment methods to the markets it served. For instance, in Italy Zalando had to accept cash on delivery, while in France it accepted cheques. If an investor had used card payments penetration as the only yardstick to invest in Zalando’s European expansion, that investor would have left a lot of money on the table. If Zalando insisted on card payments only, it would not have succeeded in France and Italy.

Sometimes you may meet prospective investors who only believe that a startup must already have figured out everything, including the business model. So those investors believe that multiple business models is somewhat a sign of confusion. LOL. The truth is, startups start with assumptions, then they execute and have to adjust their models to the realities they meet in their operating environment.

Maybe it depends what people call a business model and at what level it is. The Coca Cola Company, a very successful business, sells Coca Cola via independent bottlers and its own businesses. You can get a Coke over the counter in a store or even from a vending machine. The Coca cola Company does not just do one thing that was successful. Originally, Coca Cola was not sold in a bottle.

In the software industry, I know some companies that used to sell software licences on a compact disk (CD) per installation or computer, and then they changed that model to software-as-a-service, they moved to the cloud, now you pay subscriptions to access the software online instead of installing it on your computer or server.

Bank accounts used to be paper-based. That model is now dead. Bank accounts are now electronic, but there was a time when electronic banking did not have a competitive edge against paper-based banking.

Prosper on Farms is also trying and testing various models with its farmers. Our success may actually come from various business models and not just one. So we do everything.

And who said you must have just one business model? Even Microsoft, Stripe, and Tesla have various business models. The path to business success is not linear and straightforward. So Prosper on Farms is open-minded and open to trying various business models to find the best one(s).

Prosper on Farms does not necessarily have to do what works elsewhere or has worked before. Some business models that failed in the past may also work today. Past failure is not a predictor of failure in the future. There were many social networks that failed before Facebook came along, and there were some online video startups that failed before YouTube came along, yet YouTube is a massive success today! How? It is not because YouTube was bought by Google. It is because prior to YouTube, starting a website like YouTube was very expensive. YouTube succeeded as computing power increased while the price of computing hardware fell, and secondly, the massive expansion of broadband capacity, increase in access to broadband internet, and fall in the price of broadband internet. That’s how YouTube was able to succeed where other online video startups had failed in the past. So, what was tried and tested and failed, may succeed this time round depending on various factors. We will keep our minds open.

When you go out raising money, you will meet all kinds of investors, just as investors will meet all kinds of businesses.

The story is always that poor people, because they live in poverty, are not profitable.

Let me tell you a story, a parable. One day a rich guy who owns a big diamond mine went to a company that supplied irrigation equipment. They knew him to be rich and they figured that since he is rich, he will easily pay for the irrigation system. He got the irrigation equipment  worth US$120 000 installed on his farm on credit and he never paid a penny. When the irrigation company would ask him when he was going to settle his account, he would tell them stories. Weeks turned into months and months turned into years. The irrigation company was too afraid to take him to court because he was rich and powerful and known by all. Eventually the debt, all US$120 000 of it, was written off by the company.

Meanwhile, a street vendor at a corner in a poor neighbourhood sold sweets for 2 cents, with a profit of 1 cent on each sweet. Each day, the vendor made a profit of US$5 from selling sweets. Selling to the poor was more profitable than selling to diamond magnate.

The idea that poor people are not profitable is a widely accepted wisdom that is actually not true.

Most Africans are poor, living on less than US$2 a day, but mobile network operators in Africa are making billions of dollars in revenue in Africa from the very same poor Africans, and they are profitable. How?

Poor people can also be profitable customers.

A lot of people wonder why African financial technology (fintech) startups have been almost exclusively the recipients of big-name venture capital (VC) startup funding.

Well, I will tell you the simple answer. It is because African fintechs have revenue instantly, from day one.

Fintechs, unlike farmers, do not plant anything in the ground and then wait for 150 days or 6 months before getting any revenue.

Take Prosper on Farms for example.

Prosper on Farms gives African farmers irrigation systems without requiring any money from African farmers. The farmers only have to meet agreed production targets, delivering the crop to an offtaker, usually an industrial agroprocessor. The farmers earn their income when they sell their harvest, and Prosper on Farms makes its money when the offtaker has received the crop. That means Prosper on Farms may go for as long as 6 months, depending on the crop, without getting a dime in revenue from a farmer first. Compare that to a fintech or mobile payment system that charges users transaction fees.

Why does Prosper on Farms not require upfront payment from African farmers?

It’s because most farmers in Africa live on less than US$2 a day and do not even have the money to pay a deposit even for a US$250 water pump.

Secondly, it is a fraud prevention measure because it means farmers will not believe or entertain a fraudster or conman who claims to be collecting money or requiring money for Prosper on Farms. It keeps the farmers safe. By simply not requiring any money from farmers, Prosper on Farms does not have to tell farmers 1000 things to look out for to prevent fraud.

So, recently a fund said it will only support startups that already have revenue.

It is not like Prosper on Farms is not going to have revenues, they just take longer.

Now imagine a situation where you are an African in Africa and you actually needed capital to start a business like Prosper on Farms, those funds or investors will not even fund you.

But you will find some non-African tech startups getting funded without showing any revenues, raising millions of dollars after only just showing a pitchdeck, a PowerPoint presentation.

Agricool, a French startup that did not even have a business model, got US$35 million in funding from investors to grow food in containers.

When it comes to Africa, a lot of big-name venture capitalists want to invest in African payments systems (fintechs) so that they make money from the farmers’ payments and the farmers’ transfers of money on the African payment systems.

But how much money do you think will move on African payment platforms if almost all African farmers continue to live on less than US$2 a day?

Over 80% of jobs in Sub-Saharan Africa are in agriculture.

The irrigation systems that we provide to farmers allow farmers to more than double or quadruple their incomes, which means the farmers will have more money to spend, which also means that the fintech companies can make higher revenues from higher value transactions on their platforms, which ultimately means that investors in African fintechs will get way richer if African farmers are provided with irrigation.

In some cases, a client African farmer who Prosper on Farms supports will actually make enough money to qualify to be in the top 20% of income earners in the United States. Yet the big-name venture capital firms would rather not invest in the basic boosters of economic activity like ours.

So, somebody has to invest in the providers of basic agricultural infrastructure for African farmers’ success, irrigation, and that is us.

There is something wrong with the picture of big-name global venture capital funds funding African fintechs so that the global venture capital funds can profit from the money transfers of aid agencies, like those of World Food Programme, to poor African farmers who require food aid and financial aid because they do not have irrigation amid ever frequent droughts because of climate change.

How about lifting the farmer out of poverty with irrigation first? A lot of big-name venture capitalists will tell you that it is because that does not fit their “investment thesis”. LOL

So, what fits their investment thesis?

Fintech! It makes money right here and right now!

Whoever has the gold makes the rules.

Prosper on Farms focuses on both small and large-scale irrigation systems.

Somebody once suggested that Prosper on Farms focus on large irrigation systems because that way huge quantities of food can be grown within a short time.

Well, on the surface it looks that way, but in reality, in Africa that is not the way to go.

Let’s just say history recorded that African governments and international donors in the past focused on large-scale irrigation systems and yet still, today Africa is a net importer of food.

If focusing on large-scale irrigation on its own worked, Africa would be a net exporter of food and there would be many African billionaire farmers in the Forbes rich list.

At first Prosper on Farms targeted big farms that were at least 20 hectares, then reduced the entry level to 10 hectares, then to 1 hectare based on farmer demand and new insights.

There are logistical benefits and economies of scale that arise from farming on a large scale, but those economies of scale are not more important than the profits and other socio-economic benefits that arise from smallholder irrigation and small-scale irrigation.

Prosper on Farms also found that in some cases, measured on a cost per hectare basis, it is cheaper to provide irrigation systems to small-scale farmers than to develop large-scale irrigation systems.

This is because there are existing irrigation technologies for small-scale irrigation that are cheaper for small-scale agriculture, on a cost per hectare basis, than large scale irrigation systems.

For example, depending on the technologies used and other factors, just as an example, a small-scale irrigation system for 1 hectare may cost a farmer say US$1000, whereas a centre-pivot irrigation system may cost US$2000 per hectare and this will be for say 20 hectares, which means an initial outlay of US$40 000 for a 20 hectare centre-pivot, is enough to pay for the initial outlay of 40 hectares for smallholder farmers or small-scale farmers (US$1000 x 1 hectare each, then the result into US$40 000).

If you had to choose where to spend your US$40 000 on irrigation, where would you put it?

If you want to minimize logistical problems, you spend it on putting 20 hectares under centre-pivot irrigation.

Prosper on Farms is on a mission to put as much irrigable arable land in Zimbabwe under irrigation and as soon as possible too, at the least cost to farmers, and to benefit as many farmers as possible.

So, what that means is that in such a situation, Prosper on Farms will put 40 x 1 hectare plots under irrigation than just 1 x 20 hectare plot under irrigation. In this case many farmers benefit, more food is produced by the small-scale farmers, on even more land and at a lower cost per hectare, and many farmers are lifted out of poverty. The farmers will then afford to farm all year and to pay school fees for their children, eating a balanced and healthy diet every day.

In fact, if you have 40 farmers who now have irrigation, some of them will invest their profits into extending their own irrigation systems, which means we won’t have to do raise funds to do it for them, and we can use our limited resources to give other farmers irrigation systems.

Now, why would Prosper on Farms want to exclusively focus on large-scale irrigation systems?

A Zimbabwean pioneer centre-pivot irrigation system manufacturer-entrepreneur was on a Zimbabwean TV programme that was uploaded to YouTube, where he said some farmers in Zimbabwe phone his company saying the centre-pivot is now dead when the farmer will simply not be fully versed in operating the centre-pivot irrigation system.

How hard is it to learn how to operate a portable pump or a drip system for 1 acre or 1 hectare compared to a centre-pivot control panel?

The other thing is that by having many small-scale plots under irrigation, you spread the risk among a lot of farmers. From a national food security point of view, this is the best way to go. Lately there have been uncontrolled veld fires in Zimbabwe. 40 x 1 hectare sparsely located plots are a safer bet in the event of a fire than putting all food production on 1 large 20 hectare farm.

If you know Uber, let’s just say if 1 Uber ride fails, the whole of Uber will not go down with it.

In the rural areas, providing the small-scale farmers with irrigation actually creates more jobs than one large farm creates. There are very few permanent workers on large farms. Prosper on Farms also wants to create as many business opportunities and job opportunities for farmers at the least cost. So, while an irrigation system will be cheaper on a small-scale plot than on a large farm on a per hectare basis, more jobs will also be created on a small-scale plot on a per hectare basis.

And also because this is Zimbabwe we are talking about, there are always greedy, connected and corrupt people who want to take the big things, big farms, big harvests, big farm equipment, big irrigation systems, big tenders, big projects, big everything. How many big whigs have you ever seen fighting for tiny little things or taking small things or stealing small things? It always has to be epic!

Fraud prevention. Prosper on Farms does not require any money from farmers for irrigation systems. This is a way to avoid fraudsters misrepresenting themselves to farmers as agents or officials of Prosper on Farms and then getting paid by unsuspecting farmers. It is that simple. This is also why Prosper on Farms does not accept cash deposits or even cash payments for irrigation systems.

With the advent of mobile payments, it is easy for fraudsters who have mobile phone numbers of unsuspecting farmers to send them an SMS saying they must send money to X. To avoid farmers being defrauded, Prosper on Farms also does not accept mobile payments.

All that Prosper on Farms requires from a farmer is food production of an agreed quantity and quality, and within an agreed time-frame. Prosper on Farms together with the farmer will then handle the collection and sale of the crop. This avoids farmers falling victim to fraudsters and conmen.Our method simply means that we just tell farmers one sentence “Prosper on Farms does not require any money from farmers” to keep them safe from fraudsters, and we don’t have to tell them 10 or 20 things to keep in mind to avoid being defrauded of their money in all sorts of ways.

Some farmers are also fraudsters. Yes, it is true. You never know until they have defrauded you. Side marketing of contracted crops by farmers is also a thing in Zimbabwe.

There are other security and fraud prevention measures that we have but I am not going to post them in public. However, not requiring any money from farmers for irrigation systems or anything at all is one of our main fraud prevention measures.

If you are new to Prosper on Farms, Prosper on Farms does not give loans, charge interest, charge set-up fees, loan origination fees, loan administration fees, or require a deposit or any money from farmers for irrigation systems that Prosper on Farms provides to them.

Why does Prosper on Farms do this?

Let me tell you what the situation is like for a typical farmer in Zimbabwe, where over 90% of the agriculture is rain-fed.

THE SITUATION

The vast majority of farmers in Zimbabwe are small-scale farmers, and they live on less than US$2 a day in the rural areas practicing rain-fed subsistence agriculture.

The typical small-scale or smallholder farmer in Zimbabwe is a woman, who lives on less than US$2 a day, practices rain-fed agriculture in Zimbabwe which has 1 rainy season. She grows maize, the staple food, on 1 hectare or less, on average. The national average yield for maize in Zimbabwe is less than 1 tonne per hectare (16 bushels per acre). 1 tonne of maize is enough to meet the caloric intake of a family of 5 or 6 for a year. The Grain Marketing Board (GMB), the government grain buying statutory monopoly, buys grain at US$250 per tonne.

You can find a good-quality 1HP diesel-powered water pump going for US$250 in Zimbabwe. In the case of a bank loan to buy a US$250 water pump, a bank will require loan collateral or security that is worth at least the value of the loan principal plus interest.

One bank in Zimbabwe requires a deposit of 20% of the loan for irrigation systems, and that is for 30 hectares or more.

TRANSLATING THAT TO A FARMER

If the farmer, whose average maize yield is 1 tonne per hectare, sells her production from 1 hectare, the farmer earns US$250, which is the farmer’s annual farming income from rain-fed agriculture.

But the farmer and his family need maize to eat. Maize is the staple food and main source of calories in Zimbabwe.

Being a subsistence farmer means she is not growing this maize for sale, but for household consumption. 1 tonne of maize, which is the average national maize yield in Zimbabwe, can feed a family of six.

That therefore means all her maize production in the rainy season under rain-fed agriculture goes towards family consumption. Therefore, she does not earn US$250 from the sale of her 1 tonne harvest from rain-fed agriculture because the maize is not for sale.

So her income from farming is ZERO, or close to zero.

Banks require collateral to give her a loan to buy a pump.

LOAN COLLATERAL FROM WHERE?

Now, what kind of collateral do you think someone who earns almost US$0.00 a year will have? What kind of assets, and of what value would such a farmer who has no income have accumulated from farming for over 10 years?

Now, I said you can find a good-quality 1HP diesel-powered water pump going for US$250 in Zimbabwe, and one bank in Zimbabwe requires a deposit of 20% of the loan for an irrigation system.

A LOAN DEPOSIT OR DOWN-PAYMENT FROM WHERE?

Besides the fact that 20% of an income of US$0.00 is US$0.00, a deposit of 20% of US$250 = US$50. US$50 is the equivalent of 20% of 1 tonne, which is equal to 200kgs of maize. (I will exclude the cost of transporting the maize to the market, or let’s just say the cost of transport to the market will be zero.)

So to pay this 20% deposit, or US$50 deposit, to a bank, she will have to sell enough food to feed a family of 6 for 20% of a year, which is 73 days, which is about two-and-a-half months. Paying the US$50 deposit will literally be gambling with the lives of 6 people, just to have a water pump. Sure, and yes, the farmer could immediately grow food under irrigation and can pay off the US$250 within those 73 days but this is a risky move to a poor person. Anything could go wrong, worse with extreme weather events.

You could argue that food aid could cover for the shortfall but that is also a risky move. Sometimes food aid does not come on time, and have you ever witnessed food aid distribution in progress? Some families may be totally excluded for one reason or the other.

ALTERNATE INCOME FROM WHERE?

There are no jobs to speak of in rural areas of Zimbabwe. Most rural jobs are agricultural, and almost entirely seasonal, reliant on the rains, and that is a big “if” the rains come.

Now, where do you expect rural rain-fed subsistence farmers to find US$50 to pay a bank a deposit for a loan to buy a US$250 diesel-powered water pump? Yes, a diesel-powered water pump.

FOSSIL-FUELED PUMPS VERSUS SOLAR PUMPS

If you are wondering about solar-powered water pumps, solar-powered water pumps are even more expensive because they have solar panels and all. That means the deposit will be much higher, as much as at least 2 times higher. So most small-scale farmers would rather target a cheaper pump and worry about the diesel later.

In fact, solar-powered pumps that are sold on credit are even more expensive than if they are bought for cash in full.

OPERATING COSTS

After buying a diesel-powered water pump using a loan, because a diesel-powered water pump has lower upfront costs than a solar-powered pump, next the farmer will have to find the diesel to power the water-pump.

Now, where will the money for the regular diesel purchase come from for, say, irrigating the maize for the next 3 to 4 months while the maize is growing to maturity?

Diesel goes for more than US$1 a litre, yet a small diesel-powered water pump will require 5 litres to fill the tank.

The math just doesn’t work out in favour of smallholder farmers who almost all of them are currently practicing rain-fed subsistence farming and live on less than US$2 a day.

I have not even factored the bank loan fees and charges.

So, what can we do?

ENTER PROSPER ON FARMS

Prosper on Farms will give the farmer the irrigation system to use throughout the crop cycle and then recover the costs from the harvests. No loans, no deposit required, no money required from farmers. The farmer uses our brand new solar-powered pump to irrigate his or her crops and then helps us recover our costs using portions of their harvest(s). Prosper on Farms does not accept payment in cash because, as you know, money is evil. LOL.

Using our method, the farmer is so flexible and can even buy the pump or irrigation system from Prosper on Farms within 1 season.

HOW?

Rain-fed farmers, who do not have irrigation systems, average 1 tonne of maize per hectare in Zimbabwe.

A solar-powered pump or irrigation system can boost the maize yield per hectare by at least 2 times (actually, can even get to 20 times, to as much as 20 tonnes per hectare), which means with irrigation the farmer can now achieve at least 2 tonnes of maize per year, which means if a farmer achieves 2 tonnes through irrigation, she will still have 1 tonne of maize to feed a family of 6 for a year, and thanks to our irrigation system, she will have at least one more tonne of maize worth US$250 to sell, which is enough money to pay for a pump.

Of course there will be the cost of the diesel fuel for the pump. Keep reading.

Prosper on Farms prefers to have the maize production than to be paid money. The cost of transporting the maize eats into the income of the farmers, which is why Prosper on Farms prefers to have the maize than to be paid money by a farmer who has already incurred massive transport costs.

Instead of diesel-powered pumps, Prosper on Farms exclusively provides irrigation systems that are powered by clean energy such as wind, hydro, and solar. The initial capital outlay of clean-energy-powered irrigation systems is higher than for fossil fuels, but farmers can actually pay back the costs of these solar-powered irrigation systems. By giving farmers irrigation systems, no payment required, Prosper on Farms solves the chicken-and-egg on-boarding problem.

SOLVING THE CHICKEN AND EGG PROBLEM

With mechanized irrigation, a farmer can achieve at least 5 tonnes of maize per hectare, not 2 tonnes. That means subtracting 1 tonne of maize for household consumption for a family of 5 or 6 for a year, the farmer will harvest enough maize to pay back at least US$1000 for a solar-powered irrigation system for 1 hectare. This is besides the fact that the farmer will have 7 or more months to grow other crops for household consumption under irrigation. That means the farmer can definitely pay for an irrigation system for 1 hectare within a year.

THE QUESTION

Why the hell, then, would we ever want to a down-payment or deposit from farmers who have an annual income of zero dollars a year?

A farmer who lives on less than US$2 a day harvesting less than 1 tonne of maize per year will pay a deposit with money from where?

If the goal is to help farmers feed their families and to lift themselves out of poverty through higher agricultural productivity from mechanised irrigation, if Prosper on Farms asks for a deposit, it would mean that Prosper on Farms is only targeting and benefiting well-off farmers who can afford to pay a deposit, and excluding those who need irrigation systems who cannot even afford to pay a deposit, but are otherwise able to pay off an irrigation system given their previous production performance under rain-fed agriculture.

Prosper on Farms is giving access to irrigation and irrigation systems to all farmers, including those farmers who have nothing, but who have demonstrated production potential under rain-fed agriculture when rains have been good.

They are starting from zero, with nothing.

How can we ask a farmer who has nothing, to pay a deposit? It would be immoral, unjust, and highly unethical.

WHAT’S BETTER THAN A LOAN? PROSPER ON FARMS!

Unlike banks and others, we also don’t pressure farmers to pay up and Prosper on Farms does not take the property of poor farmers when they fail. If a farmer fails to meet production targets, we try to help the farmer, and if that fails, we take back our irrigation system, never to return. That is simpler and better than loans.

Last week I sat down with a banker who I am grateful shared his wealth of experience with me, his experience of lending to farmers in a division of one big bank in Zimbabwe.

He spoke like a true banker, talking about risks, risks, and risks. By the time I left his office I knew about risks, risks, and risks of lending to small-scale farmers in Zimbabwe.

Their bank used to lend to small-scale farmers, but now it doesn’t and it lends only to large-scale commercial farmers.

There are a lot of experiences he shared with me which I cannot share with you for confidentiality reasons.

It so happens that the bank left the small-scale market at a time when we now target small-scale and medium-scale farmers more than large-scale farmers. In fact, think of a pyramid. Our main target market is going to be the bottom of that pyramid, the small-scale farmers he said are risky.

However, the idea that small-scale farmers are risky is one I dispute, and I also base this on his other experience he shared. I would say it all depends on how you approach the market and what your approach to the market is.

Their business model is lending to farmers. People behave in funny ways when they are in debt and they are miss paying loan repayment installments, – from ghosting to skipping town – , but if you remove the yoke of debt, they are likely to be more cooperative. Unfortunately, a bank cannot do that do debt-free business, it’s business is to give loans.

The way Prosper on Farms operates is different from a bank. Our business is not giving loans. We are not a bank whose business it is to lend money, but a facilitator of agricultural production under irrigation and buyer of agricultural production. We don’t make money from interest payments, but from value addition.

I would say the bank exited the market too soon and had entered the small-scale market unprepared and it prematurely left the small-scale market when it had learned the lessons for it to now succeed going forward.

It was their business model and the nature of their business, that made them fail to succeed in the small-scale market, but for confidentiality reasons I can’t go deep into it.

But I learned my lessons.

Over 70% of the Zimbabwean population lives on less than US$2 a day. This translates into a maximum income of US$730 a year. The cost of irrigation development ranges from US$1000 to US$5000 per hectare depending on various factors. Borehole-supplied irrigation systems for 1 hectare in rural areas where most farmers live cost anything from US$5000 to, sometimes, even more than US$10 000 depending on the location of the farm and its distance from the borehole company.

US$730 is actually a lot, because when rains don’t come, farmers may be living on less than US$100 a year. How will they then survive, what will they eat? They will survive on food aid. The problem with food aid however, is that it does not give farmers incomes. So, what you then find lately in Zimbabwe is aid organizations giving cash transfers of say US$10 to people in the rural areas. This is very controversial.

If you give the same farmer irrigation, that same farmer who is surviving on food aid will immediately have a full-time job and will be able to earn income all seasons of the year.

So, how much can a farmer who has irrigation earn per hectare? Well, it depends what they are growing, but let us use maize which is the primary imported food aid.

In Zimbabwe the price of maize is controlled and set by the government. Farmers are not happy with the price that the government pays as well as the currency that the government uses to pay them, mostly Zimbabwean dollars. In 2021, the government was buying maize at the equivalent of US$380 per tonne. In 2022, the government buying price of maize was reduced to US$250, at a time when there was even a shortage of maize. Maize deliveries to government depots are just a trickle. The government is now giving a part of the buying price pegged at US$90 at the official government exchange rate. This is at a time when prices of maize have risen around the world because of the war in Ukraine. So, imports are the thing now, when the price of maize on international markets is very high. It’s a long story, maybe for another day.

For our calculations, let’s use a government buying price US$250 per tonne of maize, which for many years has been the price of maize on the international market. The national average yield for maize in Zimbabwe is less than 1 tonne per hectare. This is in a country where over 90% of farmers practice rain-fed agriculture. That effectively means most small-scale farmers on 1 hectare or less live on less than US$2 a year (US$250 divided by 365 days) from rain-fed farming.

With irrigation, however, maize yields can be anything from 5 tonnes per hectare to even more than 10 hectares per tonne, of course depending on things such as maize variety, environmental conditions, and other factors. Even 10 tonnes per hectare is achievable. What that means is that irrigation can increase farmer incomes by 5 to even more than 10 times, to US$1250 to even over US$2500 per hectare, from maize alone. Maize needs 90 days to 150 days to be ready to harvest. The remaining days of the year can be used to grow other crops that can fetch even better p[rices than maize.

Anyway, basically, not taking living expenses into account, an income of between US$1250 and US$2500 over 6 months from just one crop is enough to allow a farmer to payback an irrigation system for 1 hectare worth US$1250 to US$2500 per hectare in 1 season.

If a farmer needs US$10 000 irrigation system, then the farmer will need more seasons.

So, technically, the so-called poor farmers are not really poor and they can afford irrigation systems if they are willing to work. What these so-called poor farmers lack is access to irrigation, which is not affordable or accessible to them when they are living on less than US$2 a day, sometimes less than US$0.10 day, and they have no access to credit or collateral that matches the cost of the irrigation system.

The farmers lack access to bank loans and credit for commercial farming. They do not have collateral with which to secure loans. They also cannot afford the required down payment or deposit for a loan for an irrigation system. Bank branches and financial services are very far away from most of them, worse now with the closure of many bank branches in the name of a so-called strategy called branchless banking.

To help these farmers, most of whom live in rural areas, and any farmer to acquire their own irrigation systems, Prosper on Farms enrolls these farmers in contract farming and gives them the irrigation system to ensure that they are able to produce the crop that enables Prosper on Farms’ to be able to recover its investment on irrigation systems it puts on their farms.

At the end of the contract, if the farmer has been productive, Prosper on Farms will handover the irrigation system to the farmer free of charge to the farmer, and the farmer will qualify for an even bigger contract farming agreement and bigger irrigation system of up to 100 hectares at a time.

If the farmer is unproductive, Prosper on farms will give the irrigation system to a more productive farmer, like any shrewd investor would. Prosper on Farms is not a donor. The farmer therefore does not pay anything and does not even need to provide collateral or a deposit or make loan repayments. This is not a loan, but simply a farming agreement, backed by an irrigation system as an incentive and an enabler for successful farming.

Prosper on Farms does not give loans; use installments, lay-by, microloans, or Pay As You Go models. Prosper uses a no-pay model, which means farmers do not pay money to Prosper on Farms to have irrigation. All the farmer has to do is to meet our agreed production targets under our contract farming agreement in order for them to eventually own the irrigation system.

LOANS

Prosper on Farms does not give loans to farmers because we do not want to put farmers in debt, EVER.

In India, farmer suicides are the highest in the world, and they are over debts. A farmer must farm without feeling so much pressure to repay a loan.

Loans also need collateral for them to be safe to the lender, and most farmers in Zimbabwe and Africa do not have valuable collateral.

It must be the Bible which says a borrower is slave to the lender. We don’t want slaves.

We do not even like 0% interest loans. A loan is a loan and it still has to be paid back. You will always have that burden of having to pay it back, and it can give you unnecessary stress that is not good for your health.

INSTALLMENTS AND LAY-BY

Loans also have installments, which is another thing we don’t like. The nature of agriculture is such that sometimes a good 150 days will go by from planting to harvesting, and then maybe even a good more 60 days before finally selling the crop. How then will the farmer be able to pay in installments? It’s just not practical and unnecessary. We want farmers to feel completely free farming, farming with peace of mind. We all work best when we are under minimum stress.

MICROLENDING

Microloans of the type that Grameen Bank is famous for have their place but they are just not our thing. Microloans come with interest, and we do not want to give farmers loans and also charge farmers interest on those loans. The Grameen Bank model is very successful, with a very low loan default rates, much lower default rates than Zimbabwean banks that are lending to farmers. Loans are not our thing.

The other problem with the Grameen Bank model is that it uses group-lending, a feature which could cause social conflict that could last for generations in communities if something goes wrong. Microloans keep you micro. We want to give farmers something that makes them prosper and grow. We want our farmers to be able to buy cars and even tractors on their own, thanks to having got assistance from us to kickstart irrigated commercial farming.

In Zimbabwe microloans have the highest interest rates like you have never seen. Their interest rates are higher than those of banks.

We don’t want to be a financial institution, no, we want to be a food production engine and farmer prosperity engine rather than a lender of money. Banking is not for us. Money is boring, but food is interesting.

BUY NOW. PAY LATER.

The buy now pay later (BNPL) model is all the rage these days in investment circles.

Why buy? Why even pay? Prosper on Farms’ model is don’t buy, don’t pay, just have it, produce, and you will own it.

African farmers have unique challenges that “buy now pay later” cannot solve.

Imagine we give farmers irrigation systems and let them pay us after the harvest. That will not work. We will go out of business. They are already failing to repay bank loans. Proof that that model doesn’t work. The challenges that a farmer will have range from personal to business challenges such as value chain challenges and supply chain challenges. For instance, the farmer may not have a market. The last thing we need is to visit a farmer who has not yet repaid a loan and find that the farmer did not have a market at all in the first place and all the crop is now rotten. Prosper on Farms uses contract farming to avoid such problems. The farmer just produces on the farm, and we provide assistance the farmer requires, such as irrigation, and inputs support and a market through a partner contract farming company or buyer. It doesn’t get simpler than that.

PAY AS YOU GO

There are many pay as you go solutions in Africa. In the irrigation space, most pay as you go solutions in Africa are for small farms that are less than 1 hectare, usually less than 2 hectares. The solar-powered pumps that are sold on a pay as you go model recover their costs through mobile money payments. The pay as you go model is prepaid, which is a barrier to access productive assets for those who do not have the money to prepay to use the asset for a short time at a time. In short, prepaid or pay as you go is for the rich.

Not only that, pay as you go irrigation has the problem that when a farmer’s crops need irrigation the most, that may be when the farmer does not have money and while the farmer will have the solar powered water pump, the pump will not pump any water until the farmer has paid the money. Meanwhile, the solar powered pump will be just lying idle until the farmer has paid money, just like with prepaid mobile airtime or talktime. If the farmer has no money at that point, the farmer is required to take out a loan with the solar pump supplier.

Investors love pay as you go.

We don’t work like that. We can’t work like that. We are pro-farmer and we want farmers to prosper. We are not selling devices or gadgets, but prosperity. We do not measure our success in terms of units sold, but in terms of farmer incomes, yield improvement, production increase, and agricultural productivity and harvests.

Pay as you go sells the thing, a device, but it does not lift a farmer out of poverty.

Our approach ensures that Africa does not go hungry because whoever we give an irrigation system must be productive to ultimately own it. We do not require money from farmers, just production. We are not selling irrigation systems, but increasing African food security and self-sufficiency through giving farmers irrigation systems without requiring any money payments from them.

PHILOSOPHY

The philosophy of Prosper on Farms is like that of the Parable of the Talents that Jesus told in the Bible (Matthew 25:14-30). It goes something like this.

A long time ago, before leaving his house on a journey to a far away land, a master called his three servants and gave them all some money, coins, based on their ABILITIES. The first servant got 5 coins, the second servant got 2 coins, and the third servant got 1 coin. When the master returned several months later and he asked his servants how they did with the money he gave them. The first servant who got 5 coins said he made 100% profit, 5 more coins. The master was happy and he said he would promote the servant and give him a bigger role in his estate. The second servant who got 2 coins said he made 100% profit, 2 more coins. The master was happy and he said he would promote the servant and give him a bigger role in his estate. The third servant said to the master that he dug a hole and hid the coin in it because as he said, “You want to make a profit yet you are not the one who will be doing the work, I will.” The master then said to the servant, “Instead of burying the coin in the ground, you could simply have taken the coin to the bank and it would have earned interest.” The master then ordered that the coin be taken from that servant and be given to the servant who had made the most profit, 5 coins. The master, speaking in the old English of those days said, “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath. “

What that means is that whoever is most productive will be given more and he who is not productive will lose everything. That is what we do.

Our philosophy is that we give the farmer what the farmer needs to thrive as a farmer including irrigation, no irrigation loans, no interest.

If the farmer is productive, we increase the size of the contract farming that the farmer can do by increasing the value of the contract and the size of the irrigation system.

A farmer can start with a contract that covers 1 hectare, and if that farmer is very productive, we give the farmer an even larger contract and an even larger irrigation system, for up to 10 times the area they were farming in the previous contract, that means up to 10 hectares. If the farmer does well on that land of up to 10 hectares, we increase the value of the contract again and the size of the irrigation system to up to 100 hectares. Prosper on Farms will own the irrigation system for the length of our contract and will transfer ownership of the irrigation system to the farmer if the farmer meet our production targets within the time frame we agreed to in the contract.

On the other hand, if a farmer performs poorly across seasons or is lazy, we cancel the contract farming agreement, permanently blacklist the farmer and the farm, and ask the farmer to let a more productive farmers use the farm. The farmer then undergoes paid on-the-job training under that productive farmer. When that productive farmer has met the production targets, the farmer who owns the farm gets to keep the irrigation system.

If the farmer is unhappy with that arrangement, we will remove the irrigation system and relocate it to the farm of a farmer who is far more productive, just like in the Parable of the Talents. In the case of a borehole-supplied irrigation system, we remove everything, even pumps and solar panels, and leave a capped hole and leave the farmer as the farmer was before. In the case of centre-pivot irrigation systems, we remove everything and put it on another farm, then the farmer can try others such as government facilities which are probably 10 times better than what we offer.

When such an opportunity as we give a farmer has been given to you, don’t waste it. We are not a government or a donor.

How can Africa feed itself if farmers who have demonstrated themselves to be unproductive even when given irrigation systems continue to sit on them while those who are more productive even with the little they have do not even have access to irrigation systems? The answer to that is by putting more farming resources to where they will be most productive. No excuses. Jesus showed us the way, the truth, and the light. You all know that I am right.